How an Offshore LLC Works

A limited liability company begins with the filing of a simple document with a designated government office (such as Registrar of Companies or Commissioner of Corporations) in a state or country whose laws authorize the formation of LLCs. An “offshore LLC” or “foreign LLC” is a limited liability company formed under the laws of the foreign country you have selected.

The owners of an LLC customarily are referred to as its “Members.” The laws of most jurisdictions that authorize LLCs allow such a company to be owned by a single Member, so you individually can own 100% of an LLC. Companies and trusts, as well as individuals, also are legally eligible to be Members.

In most cases, management authority over an LLC is given to one or more persons customarily referred to as the LLC’s “Managers.” Companies and trusts, as well as individuals, are legally eligible to be Managers. A given person (such as you) can be both a Member and a Manager.

The understanding and agreement among the Member(s) and the Manager(s) are set out in a document customarily referred to as the LLC’s “Operating Agreement.” The Operating Agreement describes, among other things:

  • How profits are divided among the Member(s)
  • How the Manager(s) can be replaced
  • How the company can be dissolved
  • How the Operating Agreement can be amended

The laws that authorize LLCs generally allow Members and Managers wide latitude to design their own Operating Agreement. In some jurisdictions, there are no restrictions whatsoever on what the Members and Managers may agree to, other than an action that would be illegal for any of them to undertake on their own (e.g., rob a bank).

If you are both a Member of an LLC and also a Manager, you would sign the LLC’s Operating Agreement in both capacities.

NEXT: Your LLC Isn’t You

Your LLC has no legal responsibility for your personal debts.

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